- Web Desk
- 42 Minutes ago
Car financing hits 24-month low amid high interest rates
- Web Desk
- Jul 18, 2024
ISLAMABAD: The automotive sector in Pakistan is facing a persistent downturn in financing, exacerbated by a combination of factors including increased car prices, higher interest rates, regulatory constraints on loan acquisition, and elevated taxes on imported cars and parts.
According to recent data from the State Bank of Pakistan (SBP), automobile financing dropped by 1.0 per cent month-on-month to Rs230.5 billion in June 2024, down from Rs232.79 billion the previous month.
This marks the 24th consecutive month of decline in consumer financing for transportation, primarily for car purchases.
Comparing year-on-year figures, car financing plummeted by 21.5 per cent, falling from Rs293.73 billion in June last year to the current Rs230.5 billion.
In contrast, financing for house building also experienced a decline, reaching Rs203.58 billion by the end of June 2024, down 4.1 per cent year-on-year and 0.8 per cent month-on-month from Rs205.3 billion in May.
Financing for personal use showed a mixed trend, with a year-on-year decrease of 5.6 per cent amounting to Rs238.6 billion, yet a marginal 0.4 per cent increase from the previous month. Overall, credit disbursed to consumers recorded a 6.7 per cent decline year-on-year, totaling Rs802.35 billion in June 2024, with a slight 0.2 per cent increase from May’s Rs801.1 billion.
In contrast to consumer financing, outstanding credit to the private sector demonstrated resilience, rising by 5.8 per cent year-on-year to Rs8.57 trillion by June 2024.
This reflects a 2.0 per cent month-on-month increase from Rs8.41 trillion in May, driven notably by loans to the manufacturing sector which stood at Rs4.84 trillion, up by 6.6 per cent year-on-year and 0.9 per cent month-on-month.
The data underscores ongoing challenges in consumer finance amid broader economic pressures, influencing both individual spending patterns and sectoral credit dynamics in Pakistan’s financial landscape.
Read next: PSX soars to new record high